Money in the Street

Sometimes you learn the most important lessons at home. After working in the surety bonding industry for more than 40 years, my father started up his own company in that business. At age 64, he still had the “fire in the belly” necessary to start a new business and become an independent broker of surety bonds.

He helped contractors in metropolitan New York/New Jersey get the construction bonds they needed to work on large construction projects. It became a very lucrative business for him.

When I asked him why he founded his own company at an age when so many other people are quite happy to retire, he said, “If there's money in the street, I am going to pick it up.” He said the business was there for the taking, and he was in the right place at the right time to get it because of his expertise in surety bonding and his business relationships.

I was thinking about my father's entrepreneurial instincts while writing this month's cover story (“Going Green,” page 18) on Bernie Erickson, president and CEO, O.K. Electric Supply, Perth Amboy, N.J., and that company's Energy Solutions division, a full-service energy service company (ESCO) that audits facilities, recommends lighting upgrades, supplies products and often finds subcontractors to perform the work. It's a one-of-a-kind enterprise uniquely positioned to pick up the money it finds available in the streets of metropolitan New York/New Jersey.

The money in this market opportunity isn't just laying on the streets for any distributor who wants to pick up a few quick bucks. Bernie Erickson has been doing lighting retrofits for more than 20 years, and he is an acknowledged master of the lighting game. His name is at the top of a very short list of distributors in the United States who have invested in a full-service strategy in the lighting retrofit market. If the energy market were an easy business to master, more electrical distributors would have done it long ago.

To succeed in this market, O.K. Electric had to become an ESCO. ESCOs live in a different land than traditional distributors. In addition to understanding the technical nuances of different lamp types and related lighting products and using that knowledge to tailor a system for customers' applications, they must know where to find financial incentives such as utility rebates and local, state or federal government programs to finance the retrofits.

While smaller lighting retrofits for Main Street shops, factories and other smaller businesses are important, the big-dollar contracts are with Fortune 500 firms; government entities; and property-management firms that own or lease millions of square feet of office space, warehouses and industrial buildings. To win business from these accounts, ESCOs establish business relationships with the suits in the executive suites who make the buying decisions and speak to them in their language. These customers measure a retrofit's feasibility in its return on investment (ROI) and the financial incentives that can help finance the job.

None of this is rocket science. When you get right down to it, lighting retrofits basically come down to selling skills that can be developed, business contacts that can be nurtured and technical product knowledge that can be learned. But few full-line distributors have built ESCO divisions such as O.K. Electric's Energy Solutions. Apparently content with the high volume and low margin of their traditional business, most full-line distributors haven't taken full advantage of the opportunities in lighting retrofits.

They still can because of some important market drivers. With fuel costs squeezing the bottom line, energy conservation is in the public consciousness again. Utility rebates are back, and tax breaks from Uncle Sam are available for business owners who retrofit their facilities with energy-efficient lighting and other green building products.

Despite their past indifference to this market opportunity, distributors are still in a unique position to capitalize on it. They have the relationships in place with many of the key vendors. They call on many customers who would benefit from retrofits, and they already sell many energy-efficient products. They may not start picking up money in the street like my father. But it's still a great market opportunity.